RAM Ratings: TM can withstand credit impact due to broadband price reduction

A woman walks past a logo display of Telekom Malaysia at its office in Cyberjaya. — Reuters pic
A woman walks past a logo display of Telekom at its office in Cyberjaya. — Reuters pic

, June 29 ― Telekom Malaysia Bhd (TM) will be able to withstand the potential credit impact due to a price cut in broadband prices, says RAM Ratings.

The rating agency said its analysis showed that initial assessment assumed a gradual 25 per cent reduction in broadband subscription rates over the next two years, flat subscriber growth and further debt draw down; for capital expenditure and dividends.

“TM’s gearing level may peak at 1.5 times while its funds from operations debt coverage may thin to an average of 0.31 times in the next three years. 

“As TM’s credit metrics are expected to remain within its rating threshold, we do not foresee any immediate impact on the AAA/Stable/P1 ratings of the group’s programmes.

“Our rating approach also considers TM’s strategic role and strong relationship with the government, which in our view, renders the group privy to extraordinary government support,” it said in a statement today.

Last week, the government announced that broadband subscription rates could be reduced by 25 per cent by year-end pursuant to the implementation of the Mandatory Standard Access Pricing (MSAP) on June 8.

The implementation would also lower wholesale prices for high-speed broadband access for other telecommunication companies which allow telecommunication companies to slash the price of broadband packages. ― Bernama

Source: The Malay Mail Online

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